NAKE

June 14-18, Tilburg, The Netherlands

 

Structural Breaks and Multivariate Forecasting

 

James Stock, Harvard University

 

I. Structural Breaks

Primary material to be covered in lecture:

Stock, J.H. (1994), "Unit Roots, Structural Breaks and Trends," Handbook of Econometrics, v. IV, ch. 46, sections 1, 2, 5. (general overview of structural breaks and break tests)

Andrews, D.W.K. and W. Ploberger (1994), "Optimal Tests of Parameter Constancy," Econometrica, 62, 1383-1414.

Bai, J., R.L. Lumsdaine, and J.H. Stock (1998), "Testing for and Dating Common Breaks in Multivariate Time Series," Review of Economic Studies, 63, 395-432.

Bai, J. and P. Perron (1998), "Testing for and Estimation of Multiple Structural Changes," Econometrica, 47-78.

Additional related readings:

Andrews, D.W.K. (1994), "Empirical Process Methods in Econometrics," Handbook of Econometrics, v. IV, ch. 37, sections 1, 2.

Bai, J. (1997), "Estimation of a Change Point in Multiple Regression," Review of Economics and Statistics, 79, 551-563.

Chan, N.H., and Wei, C.Z. (1988), "Limiting Distributions of Least Squares Estimates of Unstable Autoregressive Processes," Annals of Statistics 16, March 1988, 367-401.

Hall, P. and C.C. Heyde, Martingale Limit Theory and its Applications. New York: Academic Press, 1980. (general background on functional central limit theory)

Nyblom, J. (1989), "Testing for the Constancy of Parameters Over Time," Journal of the American Statistical Association, 84, 223-30.z

Stock, J.H. and M.W. Watson (1998), "Median Unbiased Estimation of Coefficient Variance in a Time Varying Parameter Model," Journal of the American Statistical Association, 93, 349-358.

II. Multivariate Forecasting

Primary material to be covered in lecture:

Quah, D. and T.J. Sargent (1993), "A Dynamic Index Model for Large Cross Sections," ch. 7 in J.H. Stock and M.W. Watson (eds.), Business Cycles, Indicators, and Forecasting, University of Chicago Press for the NBER, 1993, 285-306.

Stock, J.H. and M.W. Watson (1998), "A Comparison of Linear and Nonlinear Univariate Models for Forecasting Macroeconomic Time Series," NBER Working Paper #6607. Available at: http://nberws.nber.org/papers/w6607.pdf.

Stock, J.H. and M.W. Watson (1998), "Diffusion Indexes," manuscript, Kennedy School of Government; NBER Working Paper #6702. Available at: http://nberws.nber.org/papers/w6702.pdf .

Additional related readings:

George, E.I. and R.E. McCulloch (1993), "Variable Selection via Gibbs Sampling," Journal of the American Statistical Association, 88, 881-889.

Sargent, T. (1989), "Two Models of Measurements and the Investment Accelerator," Journal of Political Economy, 97, 251-287.

Sargent, T.J, and C.A. Sims (1977), "Business Cycle Modeling without Pretending to have Too Much a-priori Economic Theory," in C. Sims et al. (eds.), New Methods in Business Cycle Research, Minneapolis: Federal Reserve Bank of Minneapolis.

Sims, C.A. (1993), "A Nine-Variable Probabilistic Macroeconomic Forecasting Model," ch. 4 in J.H. Stock and M.W. Watson, Business Cycles, Indicators and Forecasting, University of Chicago Press for the NBER, 1993.

Stock, J.H. and M.W. Watson (1991), "A Probability Model of the Coincident Economic Indicators," in K. Lahiri and G.H. Moore (eds.), Leading Economic Indicatorss: New Approaches and Forecasting Records, ch. 4. New York: Cambridge University Press, 63-85.

Stock, J.H. and M.W. Watson (1998), "Forecasting Inflation," forthcoming, Journal of Monetary Economics.

Swanson, N.R. and H. White, (1997), "A Model Selection Approach to Real-Time Macroeconomic Forecasting Using Linear Models and Artificial Neural Networks."